I believe that U.S. stocks are currently in a bull market. As a result, I think that the best ETFs for dividend income will offer conservative investors many advantages.
Specifically, as the stock market rises, these ETFs’ share prices should also climb. As a result, investors can profit both from the increased share prices of these ETFs and from their high dividends. They can also use part of the ETFs’ dividends as income. This would allow them to reinvest a portion of the payouts either in the ETF itself or in other equities.
Not only are the three names I’ve selected among the top income-generating ETFs, but they are very diverse funds. They will give investors exposure to a wide range of stocks which are well-positioned to climb significantly. Due to their diversity, these funds pose low risk.
Schwab U.S. Dividend Equity ETF (SCHD)
The Schwab U.S. Dividend Equity ETF (NYSArca:SCHD) has a fairly high dividend yield of 3.64% and a very small expense ratio of just 0.06%.
As shown by the fact that it has invested significant amounts of its funds in many different sectors, the ETF is quite diverse. 16.3% of the funds it owns are invested in healthcare, 17.5% in industrials, 11.7% in technology and 14% in financial services. I think such diversity gives this ETF strong prospects in the coming years.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
Another of the best ETFs for dividend income is the SPDR Portfolio S&P 500 High Dividend ETF (NYSEArca:SPYD).
It has much in common with the Schwab U.S. Dividend Equity ETF profiled above, but focuses on different sectors. Additionally, SPYD’s 80 high- are all in the S&P 500.
SPYD has an impressive 4.5% dividend yield and a tiny expense ratio of 0.07%
It has invested 12.5% of its assets in consumer cyclical stocks and 17.3% in financial services. Additionally, 21.7% of its assets have been used to buy real estate names. However, SPYD also has some exposure to more defensive sectors – 14% of its assets were invested in utilities and 8% in consumer defensive stocks.
One of the ETF’s four largest holdings is Paramount Global (NASDAQ:PARA), which specializes in broadcasting and streaming channels. It also has utility companies Southern Co (NYSE:SO) and Edison International (NYSE:EIX). Another large portion of its assets are in Kimberly Clark (NYSE:KMB), a large marketer of consumer staples.
Also noteworthy is that SPYD has a low trailing price-earnings ratio of 13.5.
Invesco High Yield Equity Dividend Achievers (PEY)
Invesco High Yield Equity Dividend Achievers (NASDAQ:PEY) has a dividend yield of 4.5%, which is well above the yields offered by the two other ETFs profiled in this column. However, the fund’s expense ratio of 0.52% is also meaningfully higher than the two other ETFs.
But the fund has a low trailing price-earnings ratio of 13, and it holds a diverse group of stocks. Specifically, 19% of its funds are invested in financial services names, 11% in consumer cyclicals and 7.9% in communication services. On the defensive side, 24% of its funds are invested in utilities.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.